Yahoo has admitted defeat, under the guise of openness. The company will start letting Google sell ads on Yahoo search results, generating as much as $800 million a year for Yahoo; the increase comes from Google's superior efficiency at matching ads to search queries and milking money from advertisers. Intriguingly, the reason Yahoo gave for ending talks with Microsoft was that Web search was integral to its business. Search may be, but not the ads that run alongside search?
The inconsistency seems foolish. Yahoo plans to "blend" Google ads with its search results, as well as its own search ads — suggesting it will keep its Panama search-advertising platform alive, for now. Yet outsourcing the bulk of its ads to Google, as Yahoo must do to realize its hoped-for revenues, will starve Panama of the volume of data it needs to continuously refine its ad-placement algorithms. One wonders if this has anything to do with Usama Fayyad's departure. As Yahoo's chief data officer, he must have understood better than everyone the devil's bargain Yahoo made in this Google pact.
(Illustration by dannysullivan)